What’s one thing every new business needs?
A product or service? Customers? A gap in the market?
Yes, yes and yes, but one thing comes before everything else: capital.
That’s right, cash is key to any start-up success. In simple terms, you need money to make money. Indeed, it’s been found that 29% of new businesses fail through having a lack of cash.
Any new business needs sufficient investment capital.
Now, you could use your personal savings. Sooner or later, though, most businesses need external investment. And for that, you need to know how to ask for money.
It doesn’t matter whether you’re seeking support from banks, venture capitalists, angel investors, or friends and family. Persuading them to hand over their cash isn’t easy!
Want to learn how to do it? Keep reading for 6 top tips for (successfully) asking for investment money.
1. Summon the Courage
Asking for money doesn’t always come naturally.
In fact, from a very early age, many of us are taught not to accept ‘handouts’. In a self-sufficient, individualistic society, accepting charity has an enduring bad reputation.
Not everyone’s a salesperson at heart; seeking investment can be a genuine source of concern.
Try separating yourself from the business. It isn’t you that needs the money.
Remember, for any business to serve its audience and solve its problems, it needs to flourish. Want to fill that gap in the market? You need that investment.
Shedding the pursuit of capital in that light may help you feel better with this process.
2. Be Confident In Your Business
You want to be respectful, professional and sincere.
But you don’t want to enter an exchange with investors in a timid, passive way.
Many entrepreneurs see investors as gatekeepers to their dream. They feel compelled to concede, comply and submit as a result.
That’s no way to ask for financial support. People invest in you as much as your business. Someone who exudes confidence is far more likely to secure the money they need.
See the exchange for what it is: they have money and you have a business proposition. Many people want to invest in the next big thing! You have an opportunity for them to do exactly that.
3. Have a Plan
It’s time to talk strategy.
After all, confidence only gets you so far. The next step is convincing someone to invest.
To do that, prior preparation is key; having a plan is essential.
Business plans are vital in all manner of ways. They involve everything from establishing goals and analyzing the market to predicting problems and setting expectations.
All of this information will be useful for would-be investors.
The plan shows you’re serious about the business. It’ll also answer many of their questions regarding financial expectations and competition in the market.
Make sure you know your business plan inside out. This prior preparation will bolster your confidence, present you in a professional light, and, ultimately, persuade potential investors to part with their cash.
Seeking a personal loan from a bank? Here’s all you need to know about them.
4. Cultivate Relationships
What would you say if a stranger asked you for money?
Sure, you might sling a homeless person a few dollars. However, imagine if it’s a well-dressed individual. You’re unlikely to give them anything, right?
Getting to know somebody first will be an incredible help. Now, this is less of an issue with friends and family. For everybody else, cultivating a relationship will be an almighty help.
If possible, start by reaching out for advice. Ask for an investment of knowledge. Share correspondence and work slowly to develop a mentor.
Over time, they’ll get to know and trust you and your business. Asking them for money becomes easier as a result.
5. Choose Would-Be Investors Wisely
Okay, so building a relationship facilitates the process of seeking investment.
However, it’s safe to assume that won’t always be possible. Investor meetings happen all the time with little to no prior contact between parties.
Cold-pitches are never easy. That’s why you should pick your battles wisely.
Seek meetings with people you’ve vetted in advance.
Research their prior investments to see if they’ve ever put money into similar ventures. Check their portfolios and inquire about their net worth. Look to see if they have a specific interest in your niche.
All of this works to improve your chances of success, which can make you feel more comfortable asking for money.
Similarly, for lower-level investment, only ever ask for money from people who can afford it. There’s little point asking people who don’t have the financial means.
6. Be Yourself
Asking for cash doesn’t require turning into a sleazy salesperson.
You don’t have to be a perfect, shining example of a new business. Don’t gloss over any issues and go overboard to come across in a certain way.
Again, think about how you’d respond to someone who took the same approach. As a society, we’re becoming far less tolerant of sales tactics. Instead, we want authenticity.
Being authentic is fundamental to inspiring trust and building a relationship. Convincing an investor of your business’ potential requires sincerity and genuineness.
At the end of the day, people invest in the owner as much as their business. If they see something special in you, then they’re more likely to invest. And for that to happen, you need to be yourself.
Final Thoughts on How to Ask for Money
There you have it: exactly how to ask for money to fund your new business.
New businesses face all manner of challenges to their success. However, in the battle to excel, one thing makes an abiding difference: capital.
Start-ups with sufficient money behind them have a far better chance of flourishing.
Unfortunately, the process of securing that money can be easier said than done. The process of asking for investment is one particular stumbling block for many.
Hopefully, though, this post has provided useful insight into how to do it more effectively.
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